Tuesday, 2 August 2016

Substantial Drop In Foreign Contributions

In a press
report based on a RTI application filed by NewsLaundry.com, a media
portal, it is now confirmed that FCRA funds for the fiscal year
2014-15 were only Rs 8,756 crores compared to Rs 13,115 crores during
FY 2013-14 -- a reduction of over 33% in funding.

State-wise
too funding for most states has come down. The National Capital,
Delhi has witnessed a huge drop of more than fifty per cent. Tamil
Nadu and Andhra Pradesh are the other two states where FCRA funds
have dropped extensively. Reportedly,
the impact has been felt mostly by advocacy and human rights
associations.

Tax
Treatment Of Business Income Of Charitable Institutions

Charitable
institutions falling under the category: “advancement
of any other object of general public utility” operate in perpetual
fear that if their income from sources or
activities which could be treated as “commerce, trade or business”
cross the boundary line of 20% of total income (earlier this was a
sum of Rs 25 lakhs) the Income tax officer would only be too happy to
serve a show-cause notice why registration u/s 12AA (tax exemption)
should not be cancelled.

The Central
Board of Direct Taxes (CBDT) has recently issued instructions to all
Income Tax Officers vide a circular No. 21/2016 on 27th May, 2016
that in case a charitable institute crosses this limit, then while
its income for that year would not be treated as tax exempt and would
be subjected to taxation, however its registration (u/s 12AA) for
that year should not be cancelled. In case, in the following year,
the income remains within the permissible limit, the entity will be
treated as charitable for that year.

In other
words, merely on the basis of excess receipt from commercial activity
beyond the cut-off (20% of total receipts during the financial year),
exemption u/s 12AA should not be cancelled.

The circular
also states that this is important so that such one-time taxation of
a charitable institution should not result in unintended taxation on
accreted income under the new section 115TD, which could result in
additional tax liabilities.

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About CAP

Since its founding in 1986, the Centre for Advancement of Philanthropy (CAP) has helped philanthropic organisations comply with the complex web of legal issues governing charitable giving in India. CAP specializes in all legal matters concerning the Trusts/Societies Act, Income Tax Act, FCRA, Legal Aspects of CSR and a host of allied laws and good management & compliance practices.